The Tangle Vs. Blockchain Explained

Interview with David Sønstebø

IOTA-Roundup

Abstract

IOTA is an innovative new distributed ledger technology to function as the backbone of the Internet of Things.
Born in 2014, it is the only technology of its kind that is able to function as the lightweight distributed ledger with scalability, quantum resistance and decentralization for a plethora of use-cases in the Internet of Things, the machine economy, or human applications.

IOTA was created as a far related derivation of the blockchain technology but is far more advanced and is already recognized in the innovation-press like Forbes, Techcrunch, International Business Times and Huffington Post.

Several universities already recognized the potential of IOTA and decided to work with it.

The whitepaper can be read here: Whitepaper (Version 1.3 October 2017)

The Blockchain is a great invention but it’s also stigmatized with pre-conceptions because the majority of issues occurred through human failure. Blockchain’s as such were never hacked, just the human-software interface.

The possibility of anonymous transactions is one of the reasons that some malicious actors are using blockchain based currencies in order to cover their tracks.

The functionality of blockchains and IOTA:

Most Blockchains rely on miners and validators, so to say computing-power-farmers that boost transactions through a synchronized peer to peer network and mine small parts of the currencies with processor power.

The security of the network is of utter importance and is ensured via a consensus mechanism where miners are incentivized by rewards (blocks = small parts of the currency + transaction fees), they receive when they find a block.
The combined network hash-rate then ensures the validation of newfound blocks with the help of peers in the network, to guarantee the legitimacy of the new tokens and information that are added to the network.

This complex mechanism of mining, rewarding and validating is the core principle of most blockchains that ensures upright payments and data-integrity, because once approved by the system, the values or information cannot be tampered with.

That is important because the field of application often lies in financial systems to replace currencies ($, €) -like Bitcoin.

In almost all cases: blockchains of the first and second generation are using transactions fees to prevent peers from spamming the network. Bitcoin’s transaction fees are at approx. $1 per transaction (Oct 2017).

IOTA, however, has no mining, no blocks, no transaction fees. The security and consensus of the network is not divided among miners, validators, and users.

Users of the network validate two old transactions (via proof of work) in order to be able to conduct one of their own. No one receives a reward and no one has to pay transaction fees. A miner-centralization like in Bitcoins or in Ethereums network is, therefore, not possible.

Its field of application is set in the IoT, as the technology for data integrity and industrial appliances. Furthermore pay on demand, micro-payments, and machine to machine communication like sensor technology, smart cities, adaptive systems etc.

As a settlement layer, it aims for interoperability between many existing systems.

Common blockchains cannot be adjusted to a no-fee settlement layer because the fees are integrated by design: as a monetary incentive for miners and thus: as protection for the network.

It is quite evident, that Bitcoin and nearly all other cryptocurrencies weren’t made to function as such. Considering hundreds of thousands of nano-payments each day in the near future, these Blockchains would generate an enormous amount of fees, just for conducting transactions, while costs of these nano-payments oftentimes undermatch the fees.

Therefore, it is indispensable to use a secure, fee-free system for new use-cases that are created within the fourth industrial revolution, which we are facing right now.

IOTA as the first technology that enables true nano payments, is, therefore, a novelty.

The underlying technology, the Tangle, is a third-generation distributed Ledger (DLT), based on a directed acyclic graph, made for the problems of tomorrow.

The IOTA Foundation is actively looking for talented devs and business executives.

If you want to have an additional look at the details, I recommend reading this blog post and the official IOTA blog

Official announcements are found on Twitter or on my personal account.

A lot of useful and current information are aggregated in the IOTA subreddit

Use-Cases

To understand what IOTA really means, you have to look at the use-cases that are in development and the technical limitations we already see right now and expect in the future.

The Internet of Things, the Internet of Everything are, as parts of the 4th industrial revolution, uncharted areas, that promise lots of possibilities, but due to the mentioned limitations also uncertainties.

A global network, with connections into vital infrastructures, is boon and bane. We see emerging markets, exponential growth, and progress, but also insecure terrain.

DDoS attacks are already part of our time, and without proper mechanisms, this get’s only worse.

IOTA as a data and settlement layer is able to create a system that relies on decentralization, data actuality, and temper proof algorithms. Also in the post-quantum era.

@TechCrunch Would love that for the cryptospace, together with a standard they had to accept like using primary sources, commentaries have to be marked as such and conflicts of interests should be marked at the beginning of an article. Crypto desperately needs a standard. #iota #btc #eth